SINGAPORE (July 26): Lim & Tan Securities likes ParkwayLife REIT (PLife REIT) for its long-term prospects, driven by rising demand for quality private healthcare in Asia Pacific given its fast-ageing population.

PLife REIT reported a distribution per unit (DPU) of 3.32 cents in 2Q17, a 10.3% increase from the same period last year.

See: Parkway Life REIT 2Q DPU rises 10.3% to 3.32 cents

This was led by the group’s asset recycling exercise completed in February. The divestment gains of $5.39 million are being distributed equally over the four quarters of the financial year ended December.

The group also saw its net property income increasing by 1.4% in 2Q17 and 0.7% in 1H17. The gain in net property income is largely driven by the rent contribution from properties acquired in 1Q17 and the upward minimum guaranteed rent revision of the Singapore hospital properties.

In an unrated report on Wednesday, Lim & Tan Securities says, “We understand that PLife REIT has fully hedged its Japanese Yen net income till 1Q20 and the interest rate exposure is largely hedged, with the group enjoying a lower effective all-in cost of debt of 1.1%, compared to 1.4%.”

PLife REIT’s portfolio currently has 49 high-quality healthcare and healthcare-related assets.

According to Lim & Tan, this places PLife REIT in a strategic position to benefit from the resilient growth of Asia Pacific’s healthcare industry.

The group is also supported by favourable rental lease structures, where about 95% of its Singapore and Japan portfolios have downside revenue protection and 61% of the total portfolio is pegged to CPI-linked revision formulae, which ensures a steady rental growth while protecting revenue stability amid uncertain market conditions.

Units of PLife REIT are trading at $2.74 as of 11.20am.